Product Planning Strategy and Process PDF

Product planning strategy and process Chapter 3 THE STRATEGIC PLANNING PROCESS Objectives Objectives derive from the mission and represent specific elements to be achieved by the company. Often objectives are prefaced by the phrase “to be” to reflect an aspirational target and strive to...

Product planning strategy and process Chapter 3 THE STRATEGIC PLANNING PROCESS Objectives Objectives derive from the mission and represent specific elements to be achieved by the company. Often objectives are prefaced by the phrase “to be” to reflect an aspirational target and strive to articulate broad business objectives, such as “to be profitable.” The following are examples of objectives: To be the market leader To be the recognized leader in technological innovation in the industry To be profitable To continue to increase sales To stand out with customer service Mission Mission defines the company’s central purpose, direction, and scope. Google’s mission, for example, states that, “our mission is to organize the world’s information and make it universally accessible and useful” (Google 2020). This mission statement is an example of one that adopts a traditional approach describing the functional purpose of the company. There are other styles or approaches when it comes to missions too. For instance, a mission may reflect a more focused direction like innovation. An example of this is Nike, which uses a contemporary innovation-focused mission statement that reads, “our mission is to bring inspiration and innovation to every athlete in the world. If you have a body, you are an athlete” (Nike 2020). IBM adopts value statements to articulate its mission: “IBMers believe in progress—that the application of intelligence, reason and science can improve business, society and the human condition” (IBM 2020). Missions vary widely, reflecting how companies span a diverse spectrum in terms of their purpose.  Goals Goals are measurable time-specific metrics by which successful attainment of a particular objective can be gauged. Goals are also narrower and more specific than objectives. For example, a goal statement might read “50 percent of company revenues will come from new products introduced in the past three years.” Note that the phrasing of the goal adds additional elements that help make it more quantifiable and measurable, which helps to gauge progress toward attaining a given objective. It is possible, if not common, to have multiple goals that help accomplish a business objective. The following are examples of marketing goals: 1. A minimum unit sales volume of 100,000 units per quarter 2. A 10 percent increase in 2012 sales 3. A 5 percent increase in customer satisfaction ratings by year end 4. The introduction of five new products by 2015  Strategies characterize the way in which the goals or objectives are to be realized. Put simply, a strategy is a game plan that establishes how a business will achieve a given goal. Strategies and Programs Programs (also known as tactics) are a way to execute individual strategies, where multiple tactics may be deployed to successfully implement a strategy. For example, a strategy that seeks to increase radical innovations in a company may include a program to enhance the training resources available to research and development (R&D) personnel. New Product Strategy a misnomer for product planning is the general presumption that all new products represent substantial changes and major new initiatives. New product strategy is much broader when taking into account the different types of new products possible across the dimensions of the type of market to be served: current market or new market, and the type of technology on hand ( current or new technology).  The current market does not necessarily mean immediate customers but represents customers currently within or New markets pertain to a associated with the target group of customers that have market or market segment, not been previously served by including existing customers, the company. competitor customers, and noncustomers (a potential customer that has not made a purchase yet). New technology indicates Current technology means that the respective the company has access to technology needs to be the required technology. created or acquired from somewhere else. The product/market matrix.  A market penetration strategy corresponds to an objective that aims to increase market share and/or increase product usage. Using this strategy, the firm pursues its current customer base with no significant change to the existing technology in its offering. Cost reductions and product improvements are characteristic of a market penetration strategy. These two types of new products attempt to attract or retain customers through a lower price, more features, and/or subtly improved product attributes. A product development strategy derives from an objective to capitalize on newly available product technology and offer more options to the firm’s current customer base. New product technologies may result from advances in scientific developments and knowledge, from acquiring or creating partnerships with other companies that bring unique know-how to the interfirm partnership, or even from crowdsourced ideas. Line extensions are characteristically associated with a product development strategy, wherein a new product technology is incorporated into an existing line of products to release a new offering in the line that features an advanced feature set. In this way, a company with a more diverse product line can fend off competitors.  A market development strategy stems from a primary desire to expand sales volume of existing products through new markets. This would include geographic expansions, including international markets, as well as targeting new segments. There is disinterest in pursuing any product technology changes; the predominant interest is to take the product “as is” and find new viable markets. Finding new markets and new uses for a product are characteristic of a market development strategy. Diversification is pursued when the company wishes to expand its business into related and unrelated businesses. Thus, the company will undertake new customer markets and new product technologies. New category entries and new-to-the-world products are attempted in a diversification strategy. Such pursuits may be in product technology areas and markets that are familiar or closely related to the firm’s current business. It also could be a move into unrelated business domains where the firm does not have any prior experience. A diversification strategy is akin to generating new business models for the firm. Schematic of a product development process The Product Development Process  In the case of new product development, a strategy corresponding to new products is typically coordinated through the product development process, which has historically been haphazard and unstructured. Successful companies have found that a systematic process for product development increases the propensity for new product success. Because of this, more and more companies are implementing a systematic, structured new product development process; in fact, research has reported that two out of three companies now use a formal product development process (Barczak, Griffin, and Kahn, 2009). Strategy-driven product development represents a systematic approach to product development. The company first determines the objectives and goals that it wants to achieve and then charts a course of product development that would indeed achieve these objectives and goals. Idea-directed product development can be systematic or unstructured at times. A systematic approach would be to investigate a promising idea that has been proposed, and if it is found to have potential, pursue it. An unstructured approach would be to quickly pursue an idea without an investigation phase and rush it to market. Either approach can be successful, but more often than not, a systematic approach has a better chance of success as the risks associated with potential product failure (e.g., due to lack of testing, poor research insights, or weak business plans) are minimized to a great extent.  Another view of product development is market-pull versus technology-push. Market-pull product development is focused on satisfying customer needs and closely parallels the strategy-directed approach to product development. The process begins with an analysis of the marketplace to determine customers’ needs and their views of the competition. These needs and views are then used to develop a consideration set for company objectives and goals. Continued analysis of the customer base occurs throughout the process. Indeed, a market- pull approach is common in companies where the functional units with overall responsibility for product development are comprised of marketing and business professionals. Technology-push product development closely parallels the idea- directed approach to product development. A new technology (either incremental or discontinuous in nature) is developed with or without an investigation into its potential. In many cases, a technology-push process ends with a feasible product looking for a suitable market, which requires substantial post-development work focused on selling and marketing the product. So, unlike the market-pull approach, it is typically the engineering and R&D functional areas in a firm that are responsible for technology-push product development. Radical innovations often come by way of a technology-push product development process. In fact, customers can have trouble articulating innovative or next-generation products; therefore, a technology-push approach is needed to help customers envision what is possible. Technology-push product development, however, is a very risky endeavor when the customer is overlooked. In comparison, the market-pull product development, where customer needs drive product decisions, is commercially more successful than the technology-push product development, where advanced technology drives product decisions.  A merging of the philosophies underlying market-pull and technology-push product development processes would seem reasonable. An actual merging of the two philosophies is rarely accomplished, though, because the typical product development endeavor is biased toward one of these two philosophies. Bias stems from companies assigning responsibility to (and thereby favoring) a particular department or functional area during product development, whether it is the marketing department for a market-pull approach or the engineering department for a technology-push approach.  Common to any type of product development process is the organization of product development activities into multiple phases or stages. A review point or gate is placed between phases so that a particular new product concept cannot enter a subsequent development phase until a given set of company criteria is met. Typically, these decisions are possible at each gate: a Go decision, a decision that reflects More Information or Work Needed, or a Stop decision (also referred to as a Kill Decision). Should a Stop decision be made, the project is properly documented and information stored in an “Idea Bank” so the company can learn from prior projects and avoid mistakes or problems if similar ideas emerge in later years.  This product development process is called a Stage-Gate® or phase-review product development process. Another parallel form of the product development process is called the Product and Cycle-Time Excellence (PACE) process, which was designed by the Pittiglio, Rabin, Todd, and McGrath (PRTM) consulting group (McGrath 1996). This process parallels the typical stage-gate process but focuses on product development speed to expedite time-to-market. The Product Development Institute offers an additional process model for product development called the fourth-generation product development process. The distinction of the fourth- generation product development process is that it adds a discovery stage at the front end of the product development process. This addition facilitates the generation of breakthrough product ideas, harnesses fundamental research effectively, and improves project selection through effective go/kill decision points and project synergy.  Some companies, especially those that are idea-directed, prefer to conduct the concept generation stage before the opportunity identification stage. The rationale behind this is that concept generation should not be biased by any preconceived notions of what should be developed. Instead, idea-directed companies prefer to begin the product development process with a clean slate in order to provide an environment for greater innovation. Other companies prefer to conduct an opportunity identification stage first to provide boundaries for their product development process. The rationale behind this is that concept generation can get off-track and present ideas that go beyond what the company would want to offer. The opportunity identification stage has management delineate what it will accept as a new product opportunity and provide a greater focus in the concept generation stage. Not surprisingly, such a mindset is far more common among firms that adopt a market-pull approach to product development.  Pre-technical evaluation is a typical third stage in the product development process. product concepts are evaluated and prioritized. robust business analysis conducted on the product concept. further defined via product protocols. the selection of a final set of concepts to continue in the product development process approval of their respective product protocols. Technical development represents the start of formal product development efforts. the technology behind the product concept is realized and tested meets the specifications in the product protocol construct a viable business or marketing plan Product must be nearly ready to be launched and commercialized the financial viability and marketability (i.e., profit potential) of the product are also gauged to determine whether to continue work on the product.  Launch stage comprises activities related to solidifying the market acceptance of the new product, including market testing, prelaunch preparation, launch, and postlaunch monitoring and control. The gate at the conclusion of the launch stage assesses the success of the product launch, such as favorable sales levels and profitability. Life cycle management stage represents continuous monitoring, the possible refinement of the launched product, and the possible augmentation of the product to create a product line should one not already exist. Such refinements are necessary to keep up with changing consumer needs and wants, competitor actions, government regulations, and/or new technologies. The latter part of this stage focuses on the eventual disposal of the product and substitution by the next-generation product. The following are criteria that any good product development process should have: The process should provide some structure of checkpoints along the way. The process should allow the product development team and its support group substantial degrees of freedom. The new product development process must be flexible to accommodate changing conditions. The new product development process must deal with especially critical points in development. The new product development process should integrate the team with the rest of the firm and the world. The new product development process should permit a smooth launch. The new product development process should provide for organizational learning.  Note that even if a product development process exists, companies can abuse or misuse the process. These issues include the following: Too much faith in the product being developed Lack of concern for the customer Faulty research (skewed findings) Meeting technical needs and certain customer needs, but not all customer needs Implementing a Product Development Process O’Connor (1994) laid out a five-step process: Lay the foundation: Gather information, establish the need for a product development process, analyze current practices and benchmark with best practices, and identify and attempt to understand hurdles in implementation. Gain initial commitment: Sell senior management on the need for a product development process, note and address management concerns, detail the activities per stage and criteria per gate, compose an implementation plan, and obtain a budget to implement the process. Effect change: Train management and participating players, sustain active participation in the process, develop tools to support the process, and put new projects into the process. Work the transition: Seek continual feedback, analyze the feedback and take appropriate action, continue training, and improve tools. Monitor and improve: Benchmark process with best practices, seek improvements in tools and product development activities, and refresh product development process, if needed. Challenges in new product development process Process optimization and validation: A Gaining top management Structured decision- preoccupation with commitment and making: Clarifying who achieving an optimal involvement: Without top makes which decisions will process may be infeasible; management support, the avoid confusion and/or a workable process may be process will not be conflict. just as, if not more, sustained. efficient and effective. Developing new product development leaders and Portfolio optimization: The high-performance teams: Training critical skills and company needs to develop Cross-functional knowledge: This is a portfolio management communication and necessary to support the process that decides which collaboration are process. projects to pursue and necessary to effect which to shelve. product development activities. Linking and positioning the process: The product development process must fit with other company processes.  Evaluating the product development process  Initiatives to Reduce Cost or Time Avoid unnecessary steps; reduce the number of activities pursued in a particular product development stage. Use technology to shorten programs and tactics: Computer-aided design, computer-aided manufacturing, and rapid prototyping may be useful in shortening the product development cycle time. Get early customer input to prevent redesign: Early customer involvement can help to focus the product development effort on key issues or attributes and avoid costly and time-consuming redesign or redevelopment efforts. Inventory up-front marketing and engineering projects: Consider using off-the-shelf ideas so that projects do not necessarily have to go through a full product development process. Use flexible manufacturing: A flexible manufacturing process offers a wide variety of options for product development. Join alliances: Alliances can sometimes reduce the time and resources necessary to achieve a product development objective because of shared resources. Skip a step in the process: Although not preferable, sometimes it is necessary to skip a product development activity in order to get a product to the market quickly; this should only be employed when first-to-market is critical (even when skipping a step, it is necessary to make sure that everything is good to go before launching the new product).  You are the director of Product Development for a computer component manufacturing company with total sales estimated at $250 million per year. The main business is solid-state drives (SSDs) that are sold exclusively to original equipment manufacturers (OEMs). Some of your customers include IBM, HP, and Apple who install your drivers in their computers. The company has tried several times in the past to sell directly to final consumers through retailers, but things did not work out. Case Discussion Three weeks ago, one of your fast-track engineers came to you with a prototype of a new product—a brain wave-activated mouse. It needs for no wires and is controlled totally from the user’s own brain waves. The prototype works but is only 70% accurate. You are not familiar Chapter 3 with the market because it would have to be sold directly to end users through computer retailers, and not to your traditional OEM customers because your traditional customers are not interested in paying the extra 100% differential in price. The engineer with this idea has a history of coming up with innovative solutions that have made your company money, but a few times the ideas did not work out. What do you recommend and why?